Affiliation:
1. School of Economics University of Sydney Sydney Australia
2. Faculty of Economics Keio University Minato‐ku Tokyo Japan
Abstract
We consider a model of internal competition, where projects developed by agents with different preferences compete for resources in an organization. Allowing a manager—who has moderate preferences—to control the allocation of resources has benefits when preferences are not too diverse. In particular, the manager acts as a mediator, forcing agents to compromise when competing projects succeed, thus providing better insurance to agents and increasing their effort. Our framework provides a theoretical foundation for two influential views of a manager—as the “visible hand” that allocates resources, and as a “power broker” who resolves conflict in an organization.
Subject
Economics and Econometrics,General Business, Management and Accounting,Accounting
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